We all tend to think in a linear fashion, its human nature. That if things have been moving along at a fairly regularly clip they should continue on that trajectory in the future, all other things being equal. If your earnings or cost have been trending at some given rate for the past several years, most people would assume that they will continue at a similar pace in the near future, unless you have a good reason to expect something different to happen. This might include opening a new office, entering a new line of business, an increase in payroll tax rates, changes in staff, signing a new lease, etc. With these items factored in, one could do a reasonable projection.
Then there are dislocations to normal expectations, if radical enough they are known as an inflection points that can change everything almost overnight as they are unanticipated. This can caused a severe disruptions or upheaval in business and personal lives to whatever was considered normal. The cause of this can be due to a change in government policies and institutions, terrorism, a cyberwar, civil unrest, climate change, mass migration, an unexpected death of a key person, etc. Remember the banking crisis as we had a decade ago, the high tech Y2K/dot com bust two decades ago, or the S&L crisis three decades ago. And there are natural disaster like hurricanes, floods huge forest fires, famine or pandemics.
With uncertainty one cannot properly plan for the future, be it next week or years out. We are in such as period right now with Covid, high unemployment, social and political unrest, etc. There are no simple answers that one can apply to any person or institution. As of now, consumer confidence and future expectations have fallen by 26% from pre Covid levels as of early Sep. 2020. So, what works the best in situations like these? The fact is that there are no simple one size fits all answers or prescription. And the rate of change and risk as only increased in recent years. The closest thing to advise is as follows:
Do not make any hasty decisions, unless you or others are in immediate danger
Try to get a bearing of the inflection points that are most likely to affects you, your business
Only listen to trusted sources, not to those with a personal, political or some other bias
Although one can’t be clairvoyant, one can become perceptive, being well connected, looking for early warning signs and be ready to take action using everything from crowdsourcing and unusual activity or news stories, to stock selloff/buys from insiders, early and odd news reports from far off places like another Whuhan, the BLS, scientific journal’s etc.
Have a sufficient supply of liquid assets at your disposal. Consider selling off some assets for cash
Having said that inflection points are very difficult to anticipate, nevertheless develop whatever contingency plans you can within reason using previous events as examples of what was done
Have enough cash for an emergency on hand, develop an escape plan if necessary, store key supplies for a long stay, have cellphones with extra batteries, a meeting point for your team and family
As fast as inflection point can begin, it can open up new opportunities at the same time. Such as the Covid market sell off, would up tripling Amazon’s price and doubled Dells Computer stock
Make short term plans rather than committing to long term investment in this new normal economy
Missing out on a good but speculative venture, is better than gambling on your company’s viability
